Merck (NYSE: MRK) shares are falling today after an analyst at UBS downgraded the stock to "Neutral" from "Buy," saying that the earnings prospects for the stock don't offer much upside. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on MRK.

After hitting a one-year high of $61.62 in December, the stock hit a one-year low of $34.49 last month. This morning, MRK opened at $37.59. So far today the stock has hit a low of $36.38 and a high of $37.99. As of 1:40, MRK is trading at $36.37, down $2.07 (-5.4%). The chart for MRK looks bullish and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in three and a half months as long as MRK is below $45 at October expiration. MRK would have to rise by more than 23% before we would start to lose money. Learn more about this type of trade here.

MRK hasn't been above $45 since February and has shown resistance around $38 recently. This trade could be risky if the company's earnings (due out in late-July) are a positive surprise, but even if that happens, this position could be protected by resistance MRK might find at its 50 day moving average, which is currently around $38 and falling.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MRK.